Bankruptcy is one of the fastest ways to get out of debt. All of your unsecured debts will be written off, but your assets and credit rating will be affected. Bankruptcy is probably our most well-known debt solution but is poorly understood. While it can be a start to a new life for some people, it is not suitable for everyone. If you need advice on whether bankruptcy is the best debt solution for you, please request a callback and we will set you up with an expert advisor.
So, what is bankruptcy?
Bankruptcy is a legal procedure that happens when you are unable to repay considerable outstanding debts. You can chose to petition for bankruptcy or, in some cases, be forced into it by your creditors.
All your assets will be evaluated and will be used to pay whatever portion of your outstanding debts you can afford. After bankruptcy has been completed, any of your debts that remain will be written off.
How would bankruptcy affect me?
Bankruptcy allows you to get out of unpayable debts if you cannot pay them in a reasonable time. Once you have gone bankrupt, your creditors will write off your unsecured debts.
The period of bankruptcy is usually around one year. During this time, you cannot borrow money and you have to declare any change to your circumstances.
You may have to sell off your assets like your house or car in order to contribute towards your debt. However, you will be able to keep items you need in your day-to-day life.
To start the bankruptcy process, speak to a specialist Debt Advisor to work out if bankruptcy is the right debt solution for you.
You will have to petition to the court, usually the county court nearest to where you have been living over the last 6 months. First you will need to pay a deposit and a court fee, although the court fee can be waived in certain situations.
To kick off the proceedings, you must fill in two forms called a ‘bankruptcy petition’ and ‘statement of affairs’ that you will be directed to by your chosen insolvency practitioner. You will want to keep a copy of these forms as you may need to refer to them later on in the process.
Before you present these forms to the court, you are advised to withdraw money to cover your living costs as your bank accounts may be frozen for a few weeks.
Once you are fully prepared, you will have to attend a bankruptcy hearing in court. The court can accept or reject your application.
What are the advantages of bankruptcy?
It can be one of the quickest routes out of debt.
- All unsecured debts can be written off.
- You will not be contacted by your creditors.
What are the disadvantages of bankruptcy?
Assets such as your house or car may be included in the terms of your bankruptcy.
Your job may be affected, depending on circumstance.
Your credit rating will be affected.
Bankruptcy will remain on your credit file for six years.
Who is eligible for bankruptcy?
There are no minimum debt requirements to apply for bankruptcy, but generally, your unsecured debts should be higher than the value of your assets and saving.
If you need advice on whether bankruptcy is the best debt solution for you, please request a callback and we will set you up with an expert advisor.